Any accountants on here that may be able to help....

Basically, i'm considering rolling out a service that we provide nationally using "agents" who will be self employed.

All bookings will come centrally through us and agents will get 65% off the fee with us retaining 35%.

How will the VAT be worked out? Can we pay VAT on our 35% only or do we have to charge the customer VAT and then charge the "Agent" VAT on their 65% commission?

I can't get my head around this one.

 

Before you make an accountant richer phone up VAT Helpline as they are usually friendly and will know the answer. dl

 

Possibly more significant than any VAT issue is the fact that they won't necessarily be viewed as self-employed for tax purposes if all the work they do is for you. There's a risk they'll be deemed to be your employees, regardless of what their contract with you might say, and PAYE, NI and various employee benefits will apply.

 

We employ a lot of freelancers and pay them a set rate that we make mark up on. Firstly, you need to watch IR35 as the government are cracking down on it. It would be very handy if it's not their only work.

Secondly it depends on your pay structure but ours is pretty simple - we invoice the client based on our rate and that goes into our sales ledger. We then pay our freelancers when invoiced and that goes on our purchase ledger.

Then for each VAT return it's just sales minus purchases with VAT paid on the difference.

So take charge of the billing yourselves and charge 100% then separately pay the 65% and you'll pay VAT on the 35%. You can do it on a cash or sales/purchase ledger basis - the former is MUCH easier. If turnover is under a certain threshold (I think it's now £250k) you can also opt for a fixed percentage return which can save you a lot - ask an accountant. The fixed rate varies on your type of business but is usually 12-14%. Work out a typical VAT return based on both schemes and see which one costs you the least.

You'll find with a lot of accountancy stuff is that accountants often play it very safe and fail to suggest stuff like fixed rate returns - you need to find our yourself.

 

My business is on the 'flat rate' vat scheme, I only pay 8.5% and due to this are substantially better off each quarter than if charging / claiming the standard amount. It also much simplifies paperwork.

 

Very helpful, thanks!